Generally Accepted Accounting Principles Essay

Carry Yoki’s Lounge consists of the following. Carry, the owner believed that people would come to hear a band play on Friday, Saturday, and Sunday evening. During the remainder of the week, she believed her customers would watch sporting events on several television sets located throughout the lounge. Carry employed two bartenders, three servers, two assistant servers, two cooks, one dishwasher and a clean-up person. She had a bar, 15 barstools, 4 tables, 40 chairs, 4 television sets, and one satellite dish. She had an oven, stove, grill, refrigerator, sinks, dishes, and glassware. Carry started this business with $50,000 of her own money, and she borrowed $150,000 from the bank. From this

The two approaches have many aspects in common but there are two key differences that distinguish one from the other. The difference in cash accounting and accrual accounting is the way debits and credits are applied in bookkeeping. Cash based accounting recognizes income at the time it is actually received. This means that invoiced income is not counted as an asset until payment for the invoice is received. This approach is also used for debits and any expenses incurred are not posted until they are paid. Small businesses often time use the cash accounting because it is simple and easy. It is important to recognize that this type of accounting can complicate matters when the business is up for sale or a merger is offered. The type of accounting method used in any business should not be assumed.

The cash basis of accounting records revenues when cash is received and expenses when cash is paid out. The accrual basis of accounting records revenues when they are earned and expenses when resources are used.

Assets are things that a company owns that have value. This typically means they can either be sold or used by the company to make products or provide services that can be sold. Assets include physical property, such as plants, trucks, equipment and inventory. It also includes things that can’t be touched but nevertheless exist and have value, such as

GAAP is implemented through measurement principles and disclosure principles. Measurement principles recognize and determine the timing and basis of items that enter the accounting cycle and impact the financial statements, such as the period in which transactions will be recorded. Disclosure principles determine what specific numbers and other information are essential to be presented in financial statements. Basically, GAAP is concerned with:

The difference between accrual and cash basis accounting is the timing of when revenue and expenses are recognized. The cash method is most used by small businesses and for personal finances. The cash method for revenue is only used when the money is received and expenses are only used when the money is paid out. The accrual method is used for revenue when it is earned and

The documents that comprise GAAP vary in format, completeness, and structure. As a result, financial statement preparers sometimes are not sure whether they have the right GAAP; determining what is authoritative and what is not becomes difficult. In response to these concerns, the FASB developed the Financial Accounting Standards Board Accounting Standards Codification. The FASB’s primary goal in developing the Codification is to provide in one place all the authoritative literature related to a particular topic. Professional accountants pay for access to the FASB. The OU Accounting Department has paid for academic access to the FASB Codification. Our Login information is:

GAAP stands for Generally Accepted Accounting Principles. This is a key component to know in any business. GAAP is based on established concepts, objectives, standards and conventions to guide how financial statements are prepared and presented. GAAP’s objective is to provide information that is useful to investors, lenders, or others that provide resources to a company or not-for-profit organization. GAAP includes principles on a few things. One is recognition. Recognition is defined as what items are to be listed on the financial statements. This includes assets, liabilities, revenues and expenses. The next is measurement. This refers to the amounts that need to be reports of each part of the financial statement. Another is presentation. This refers to what is displayed and listed on the statement and how they are organized. And lastly there is disclosure. This includes the specific information that is the most important to the people that utilize the financial

The GAAP that requires accountants to include, in the context of financial reporting, all information that is significant to the users of financial statements is called:

Accruals. This occurs when sales and expenses are recorded when they incur, not when they are paid out or the payment is received. In other words, the record should be made immediately no matter if the payment was received or not, paid out or not yet. Accruals can be called unpaid bills, sales on credit and other expenses over due.

GAAP (Generally Accepted Accounting Principles) determine the content and format of financial statements. SEC (Securities and Exchange Commission) requires publicly traded companies to issue annual audit. Concerns are about adequacy of disclosure; and behavioral implications are secondary.

The accrual basis of accounting conforms to the GAAP financial statements preparation provisions for external users. The US GAAP website describes financial guidelines, provides an understanding of the financial guidelines, and describes management's general flexibility. You must understand the flexibility in the GAAP standards and relate it to the individual company and its industry. Regulators view earnings quality as high when generally accepted accounting principles are adhered to.

GAAP is exceptionally useful because it attempts to regulate and normalize accounting definitions, assumptions, and methods. Because of generally accepted accounting principles one is able to presuppose that there is uniformity from year to year in the methods that are used to prepare a

1. A brief history of the two organisations, and their objectives, in as far as they

Accrual accounting is an accounting method that is utilized to size the performance and of a company by recognizing circumstances regardless of when cash transactions occur. They are documented by matching revenues to expenses at the time in which the transaction occurs rather than when a payment is processed. This method allows the current cash credits and debits to be combined with future expected cash flows to give a more accurate picture of a company 's current financial state. It is ideal to use this method of accounting if an organization has a revenue of more than five million per year. While the accrual method shows the flow of business income and debts more accurately, the downside to this method of accounting is that financial advisers may be blindsided as to what cash reserves are available, which could ultimately result in some serious cash flow obstacles. A common example that I have seen used which helps me understand is when your income ledger may show thousands of dollars in sales, while in reality your bank account is empty because your customers haven 't paid you yet. Cash Basis accounting is when revenues are documented when cash is received and expenses are recognized when paid. The cash basis of accounting is usually utilized by small companies with a revenue of less than one million annually. The cash method provides a more accurate picture of how much actual cash your business has. Cash basis accounting is allowed for tax purposes only for smaller